Key Highlights

• The S&P 500 gained 0.23 percent to close at 7,668.82, recovering from an earlier two-week low as Treasury yields retreated from a 24-year high.

• Weekly initial jobless claims fell to 197,000, below the 200,000 economists had forecast.

• The energy sector led gains, rising almost 2 percent, as Brent crude settled up more than $4 a barrel after China suspended fuel exports.

• Markets pared the odds of an October Fed rate increase to 28.2 percent, down sharply from 68.6 percent a week earlier.

A Volatile Session That Ended Higher

US stocks recovered from early losses to close higher Thursday, with the S&P 500 bouncing from a two-week low as a global bond selloff reversed course after sending US Treasury yields to multi-decade highs. Stocks were under pressure in early trading as economic data kept pointing to a solid economy with persistent price pressures, stoking fears that inflation could ultimately force the Federal Reserve to become more aggressive with interest rate increases.

The Labor Department said weekly initial jobless claims dipped to 197,000, below the 200,000 forecast by economists, the latest in a string of reports this week indicating the labor market remains on solid footing ahead of Friday's government payrolls report.

Treasury yields extended gains earlier in the session, with the benchmark 10-year note hitting a 24-year high after closing out September with its biggest quarterly gain since 1994. Stocks were pushed lower after the Institute for Supply Management said its manufacturing index dipped to 54.5 last month from 54.6 in August and showed a jump in input prices, raising further inflation concerns.

Treasury Yields Reverse Course Midday

Yields turned lower as buyers stepped in, declining further after Federal Reserve Vice Chair Philip Jefferson suggested the central bank may be patient before raising rates again, following a 25 basis point increase in September. The two-year Treasury yield, which typically moves in step with interest rate expectations, dropped nearly 10 basis points and was poised for its biggest daily drop since August 2025.

An investment chief at an asset management firm said that even though valuations have come down, the market remains far from cheap, adding that higher volatility in both equities and bonds should be expected going forward as investors adjust to a less familiar operating environment than in recent years.

According to preliminary data, the S&P 500 gained 17.28 points, or 0.23 percent, to end at 7,668.82, while the Nasdaq Composite gained 17.73 points, or 0.07 percent, to 26,871.60. The Dow Jones Industrial Average rose 29.84 points, or 0.06 percent, to 50,935.89.

Energy Sector Leads Gains Amid Oil Price Jump

Oil prices also kept stoking inflation worries. Brent crude settled up more than $4 a barrel after China suspended fuel exports, threatening to further tighten markets. The jump in crude prices helped boost the S&P 500 energy index almost 2 percent, making it the best performing of the eleven major S&P sectors.

Technology also showed strength, up nearly 1 percent as software shares rallied on results from Accenture. The consulting firm's shares surged to their highest intraday level since mid-February after it forecast full-year revenue growth above estimates. Micron Technology closed higher as a better-than-expected revenue forecast and $32 billion in customer commitments under its supply agreements reinforced investor confidence in the broader AI trade.

Rate Expectations Shift Sharply Following Fed Commentary

Softer-than-expected inflation data released Wednesday further dampened expectations that the Fed would raise rates at its October meeting. Markets were pricing in only a 28.2 percent chance of a rate increase of at least 25 basis points, down sharply from 68.6 percent a week earlier, according to futures market data.

Following Jefferson's comments, Minneapolis Federal Reserve President Neel Kashkari said he expects additional rate increases will be needed to restrain the economy heading into 2027, though he remained unsure whether the next move should happen at the October meeting specifically.